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Wednesday, February 10, 2010

Sebelius Call On Anthem Blue Cross

U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius today sent a letter to Anthem Blue Cross and called on the company to publicly justify its decision to raise premiums for its California customers by as much as 39 percent. In her letter, Sebelius notes that the parent company of Anthem Blue Cross, WellPoint Incorporated earned $2.7 billion in the last quarter of 2009.

“As we continue the health insurance reform debate in Washington, this announcement reminds us that too many Americans can be left with unaffordable insurance each time the rates or rules change in the private market,” Sebelius added. “It’s clear that we need health insurance reform that will give American families the secure, affordable coverage they need.”

The text of Sebelius’ letter is below.
Dear Ms. Margolin,

One of the biggest pressures facing families, businesses and governments at every level are skyrocketing health insurance costs. With so many families already affected by rising costs, I was very disturbed to learn through media accounts that Anthem Blue Cross plans to raise premiums for its California customers by as much as 39 percent. These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy.

Your company's strong financial position makes these rate increases even more difficult to understand. As you know, your parent company, WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone.

I believe Anthem Blue Cross has a responsibility to provide a detailed justification for these rate increases to the public. Additionally, you should make public information on the percent of your individual market premiums that is used for medical care versus the percent that is used for administrative costs. Policy holders in the individual market deserve to know if their premium increases would be invested in better medical care or insurance company overhead costs like salaries, profits, and advertising. I am aware that the State of California is investigating this matter, and urge Anthem Blue Cross to cooperate fully. In the meantime, I will be closely monitoring the situation.

At a time when health care costs are a critical threat to families as well as the nation's economy, I hope you appreciate the urgent nature of this request. I look forward to your prompt reply.

Sincerely,

Kathleen Sebelius

Secretary of Health and Human Services

Anthem’s parent is WellPoint, one of the largest publicly traded health insurers in America, which runs Blue Cross and Blue Shield plans in 14 states and Unicare plans in several others. WellPoint, through Anthem, is the largest for-profit health insurer here in California, as it is in Maine, where it controls 78 percent of the market. In Missouri, WellPoint owns 68 percent of the market; in its home state, Indiana, 60 percent. With 35 million customers, WellPoint counts one out of every nine Americans as a member of one of its plans.

Antitrust laws are supposed to prevent this kind of market power. So why are giant health insurers like WellPoint exempt? Chalk it up to an anomaly that began seven decades ago in the quaint old world of regional, nonprofit Blues. They were created in part by hospitals to spread the costs of expensive new equipment and facilities over many policy holders. Collaboration was the point, not competition. The 1945 McCarran-Ferguson Act made it official, exempting insurers from antitrust scrutiny and giving states the power to regulate them, although not necessarily any power to regulate rates.

The McCarran-Ferguson Act of 1945 gives states the exclusive authority to regulate the "business of insurance" without interference from federal regulation, unless federal law specifically provides otherwise. The Act provides that the Sherman Anti-Trust Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914, apply to the business of insurance only to the extent that such business is not regulated by state law. Thus, the Act exempts health insurance companies from federal antitrust regulations that apply to nearly every other industry, rules that protect consumers from anti-competitive business practices. Repeal of the Act would ensure that health insurance issuers and medical malpractice insurance issuers cannot engage in price fixing, bid rigging, monopoly practices, or market allocations to the detriment of competition and consumers.
While the lack of competition in the health insurance industry may well have other causes, which may or may not be cured through a repeal of the McCarran-Ferguson Act, the insurance exemption from the federal antitrust laws has not helped. Repealing the Act coupled with increased antitrust enforcement is a relatively simple first step if the ultimate goals are to rein in health care costs and provide health care to the largest number of consumers.

What would happen if the exemption were repealed?

An analysis by the Congressional Budget Office estimated that repealing the antitrust exemption for health insurers "would have no significant effects on either the federal budget or the premiums that private insurers charged for health insurance." The CBO found that premiums might increase or decrease, "but in either case the magnitude of the effects is likely to be quite small."

Defeating the bill is not a top priority for America's Health Insurance Plans, the health insurance industry's top trade association; officials said the legislation targets a problem that does not exist. But they say they are worried that any repeal could lead to an increase of lawsuits because lawyers may jump to challenge insurer practices that may be legal even without the exemption.

But J. Robert Hunter, director of insurance at the Consumer Federation of America and a former federal insurance administrator, said repealing the law could have an enormous impact on how insurers do business. He cited a recent case in New York where insurers were sharing pricing information on out-of-network procedures. "That wouldn't happen without an antitrust exemption," he says.

David Balto, a senior fellow at the Center for American Progress, a left-leaning think tank, and a former policy director of the FTC’s Bureau of Competition, said it's important for the federal government to take a more active role in regulating insurers because state regulation has been uneven. "Less than a third of states have brought consumer protection actions against insurers," he said.

Balto added that ending the antitrust exemption is long overdue. "There's no industry where competition is so clearly vanquished as in health insurance industry," he said.

Today, 02/24/10, the President announced the administration’s strong support for repealing the antitrust exemption currently enjoyed by health insurers. At its core, health reform is all about ensuring that American families and businesses have more choices, benefit from more competition, and have greater control over their own health care. Repealing this exemption is an important part of that effort.

Today there are no rules outlawing bid rigging, price fixing, and other insurance company practices that will drive up health care costs, and often drive up their own profits as well. That was transmitted to Congress in a statement of administration policy as the House considers that legislation over the next couple of days.

Rachel Maddow reviews the unconscionable premium increases by Anthem Blue Cross, a subsidiary of WellPoint, and the unwanted scrutiny they now face from Secretary of Health and Human Services, Kathleen Sebelius.

Editorials on Health Care - This is a selection of editorials examine the policy challenges and the politics behind the crucial national debate on health care reform.

Small Ideas Won’t Fix It
Some of the Republican ideas on health care reform are good, but they would barely make a dent in the system’s most critical problems.

Don’t Give Up Now
Democrats should take another look at what really happened in Massachusetts and then summon the nerve to enact comprehensive health care reform.

Cadillac Plans
An excise tax on high-cost insurance plans is the most significant measure to slow the relentless rise in health care spending.

Health Reform, the States and Medicaid
The House and Senate leaders should look for ways to lessen the Medicaid burden on hard-pressed state budgets — and ensure that relief is fairly apportioned.

The Next Step on Health Reform
It will take great political will to fuse the Senate’s health care reform bill with the more expansive reform approved by the House and enact a final version.

A Bill Well Worth Passing
The Senate health care reform bill has some imperfections, but is worthy of support from lawmakers.

Can We Afford It?
The argument that the nation cannot afford health care reform is at best disingenuous; the pending bills would actually reduce deficits.

A Modest Public Plan
Even a weak public plan would expand the choices available to Americans and could help slow the relentless increases in the cost of health insurance.

Reform and Medical Costs
The fundamental fix for health care reform is likely to be achieved only through trial and error and incremental gains.

The Ban on Abortion Coverage
The House health care reform bill passed with a steep price. The Senate should work to preserve a woman’s right to abortion services.

Mandates and Affordability
To guarantee coverage for tens of millions of uninsured Americans, health reform must provide financial support for those who need it.

The Public Plan, Continued
While an inclusion of a government-run insurance plan in health care legislation makes the most sense, there are some basic issues to consider.

The Baucus Bill
The Senate Finance Committee’s health care reform bill should be viewed as the least that Congress should do — a foundation upon which to build, not the final structure.

Abortion and Health Care Reform
There should be no restrictions on abortion coverage in the new insurance exchanges that would be created by pending health care reform bills.

Medicare Scare-Mongering
What the Republicans aren’t saying — and what the Democrats clearly aren’t saying enough — is that Medicare coverage should improve under health care reform.

A Clear Responsibility
Any critic who still questions the need for health care reform should look at the latest U.S. Census Bureau estimates of the number of people without health insurance.

President Obama Steps Forward
The president’s rhetorically powerful speech must be only the start of a sustained campaign to get health care reform legislation passed.

The Uninsured
There are tens of millions of people without insurance, often for extended periods, and there is good evidence that lack of insurance is harmful to their health.

The Public Plan
If President Obama wants to jettison the now-weakened public health plan to dampen overheated opposition, he should say what he will insist on instead.

Lining Up for Help
Any project as ambitious and expensive as health care reform must be robustly debated, but Americans need only look to the clinics last week in California to see how much we need reform.

Health Reform and Small Business
A vast majority of small businesses and their workers are likely to benefit greatly from pending health care bills. They should be supporting, not opposing, reform.

The Massachusetts Model
Calling Massachusetts’s experiment in near universal health care coverage a fiscal disaster is an egregious misread, and while imperfect, it may provide a road map for national health care reform.

Curbing Runaway Health Inflation
To absorb the cost of a health care plan to cover uninsured Americans, a variety of approaches and “game changers” should be used to slow the rate of growth in health care spending.